8 September 2020

How the mighty are risen

Here’s a statistic I never thought I’d be able to quote.


It appears the market capitalisation of Apple overtook that of the entire FTSE 100 Share Index component companies combined at the end of August. The world’s most valuable company is now worth over $2 trillion. This goes some way to explaining how it is that indices in the United States have done so well compared with here. The S&P 500 Share Index rose by over 6% during August, while our benchmark FTSE 100 Share Index could only manage a gain of just over 1%. Even Europe fared better, with a broadly based index covering 600 European stocks up by 3.5% during the month.

As it happens, our trading week had been shortened by the long Bank Holiday weekend, so we had to reflect a weak previous session on Wall Street when markets opened after what turned out to be a rather cool day off. Early trade in London saw shares hand back all of August’s modest gains – not an encouraging start to a new month and the beginning of what the meteorologists term autumn. This probably had more to do with the recent strength of sterling as US markets came in broadly positive. It is ironic that the pound influences our benchmark index in the reverse way to that which might be expected as the greater part of the profits of Footsie companies are earned overseas.

The broader economic news has not been encouraging. The respected think tank, the Organisation for Economic Cooperation and Development (OECD) pronounced that the UK had produced the worst second quarter performance of all 37 member nations. The heavy bias in our economy towards service sectors, hospitality and consumer spending made us more vulnerable to the pandemic induced downturn. But we knew that anyway.

Company news is in short supply at this time of year, so it is inevitable that our attempts to recover from the sharpest economic decline in recorded history will be the focus of attention for investors. It could be that the increasingly bad-tempered exchanges between the Presidential candidates in the US will affect sentiment – quite how is difficult to predict. While a Democratic win would be seen as less favourable to business, many consider greater stability will result.

Back home the gradual winding down of the furlough scheme has focussed attention on the likely increase in the level of unemployment. There has also been much talk of what taxes might rise when Chancellor Sunak introduces his Autumn Budget. Certainly, there will be a massive gap between receipts and expenditure to be plugged, not to mention some massive borrowing that will have to be serviced and, in the fullness of time, repaid. We will just have to wait and see, but there is increasing inevitability that taxes will have to rise.


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